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FTC Sued for Allowing Car Dealers to Sell Recalled Vehicles with Potentially Lethal Defects

Vehicles with potentially lethal safety defects are still being legally sold to consumers.
Inside Car Dealerships Ahead of Motor Vehicle Sales Figures
Hyundai vehicles sit on display for sale on the lot of the Keyes Hyundai dealership in the Van Nuys neighborhood of Los Angeles, California, Jan. 2, 2016.Patrick T. Fallon / Bloomberg - Getty Images

Why are dealers still selling cars with unrepaired — and potentially fatal — safety recalls?

Consumer advocates are outraged by the Federal Trade Commission’s decisions in several recent cases that allow car dealers to advertise used vehicles with open recalls as safe.

Last year, the FTC reached legal agreements with General Motors and two car dealers who had advertised how rigorously they inspected their cars, but failed to disclose that some of those “certified” or “inspected” vehicles were subject to unrepaired safety recalls.

According to the complaint, some of those open recalls could cause serious injury from issues such as faulty ignition switches and airbags, problems with the power steering and braking, and alternator problems that could result in a fire.

As part of the settlement, the commission decided the dealers could claim used vehicles with unfixed recalls are “safe” or have been subject to “a rigorous inspection,” as long as they disclosed that those recall repairs were not made. GM and the car dealers did not admit any wrongdoing.

Last week, the Center for Auto Safety, Consumers for Auto Reliability and Safety, and the U.S. Public Interest Research Group sued the FTC, asking a federal court to review and overturn these consent agreements.

It's Not 'Safe' If It Is Potentially Lethal

“It’s a dangerous and irresponsible abuse of the commission’s authority,” said Rosemary Shahan, president of Consumers for Auto reliability and Safety (CARS). “Instead of protecting consumers, the FTC is allowing false and deceptive advertising. A vehicle cannot be safe when it has a potentially lethal safety defect that hasn’t been fixed.”

Related: One in Every 6 Cars on the Road Is Recalled But Not Fixed

Michael Brooks, acting director of the Center for Auto Safety, told NBC News that disclosure is not sufficient because it’s a contradiction in terms to call a vehicle “certified” or advertise that it’s been “inspected for safety” when a recall has not been fixed.

“Even if there is a 100 percent certainty that an unrepaired safety recall defect will immediately kill anyone who buys a so-called ‘certified’ car and their family, the FTC would allow car dealers to advertise that car as ‘safe’ and ‘repaired for safety,’” Brooks said. “Clearly the Court should intervene and force the FTC to reverse itself.”

Deidre Cummings, legislative director for the Massachusetts Public Interest Research Group, warned the FTC’s decision becomes the new industry standard that will jeopardize the safety of consumers across the country.

“The Federal Trade Commission is supposed to crack down on false and misleading advertising, but instead they are encouraging it,” Cummings said. “They should have protected consumers, but chose to protect reckless car dealers.”

The FTC declined to comment because of the pending litigation, but last year when these cases were settled, Jessica Rich, director of the FTC’s Bureau of Consumer Protection, noted that safety is one of the biggest considerations for consumers shopping for a car. “Companies touting the comprehensiveness of their vehicle inspections need to be straight with consumers about safety-related recalls, which can raise major safety concerns,” Rich said in her statement.

The National Auto Dealers Association also declined to comment on the lawsuit, but Jared Allen, senior director of media relations, did note that the FTC consent orders deal with advertising issues, not sales practices.

How the Industry Sees This Issue

Buyers who want a trouble-free used car or truck have come to rely on the certified pre-owned (CPO) sticker that indicates a vehicle has passed a rigorous mechanical inspection. These vehicles are assumed to be the cream of the crop. But as a result of the FTC decision, buyers can no longer assume CPO means recall-free.

Most major automakers don’t let their dealers sell a vehicle advertised as certified pre-owned, if it has an open recall. Consumer advocates worry that based on the FTC decision in the GM case, manufacturers will start to loosen up their policies.

Related: Millions of Recalled Cars Roam the Road, Risking Passengers' Lives

GM still prohibits vehicles with an open recall to be part of the GM pre-owned certified program. But Ford recently modified its policy, citing problems caused by the massive Takata airbag recall.

As reported in the New York Times, Ford told its dealers a few weeks ago that they can now advertise a vehicle with an open recall as certified, if they don’t use the word “safe” in the ad, have buyers sign a document to indicate they know about the safety hazard and contact the buyers when the replacement parts arrive.

“The safety of our customers is our top priority,” Sara Tatchio with Ford communications told NBC News. “Our dealers must complete all recalls when parts are available. In the extremely rare instance when parts are not available, our policy is that dealers must clearly disclose the situation including printing the open recall information and handing it to the prospective customer. As soon as parts are available, the dealer will then prioritize completing the open recall.”

The CarMax Case

In January, CarMax, the country’s largest used car company, and two other dealers agreed to settle charges brought by the FTC that they, too, touted inspections while failing to tell customers that some of those cars had unrepaired safety recalls.

CarMax and these auto dealers did not admit doing anything wrong. And as in the GM case, they were allowed to advertise a vehicle with an open recall as “safe” as long as they make proper disclosures.

Catherine Gryp, CarMax public relations manager, told NBC News their dealers can’t close an open recall — even if they make a fix during reconditioning — because they don’t have manufacturer-authorized repair facilities. So, she said, their goal is transparency: They notify potential customers about every vehicle’s recall status on their website and at the store.

“Buyers sign an acknowledgement that they know the recall status of that vehicle — what it is and if a remedy is available,” Gryp said. “The customer is in the best position to have recall repairs fixed directly with the dealer.”

One Dealer Draws the Line

At the Earl Stewart Toyota dealership in Lake Park, Florida, they won’t sell a used vehicle with unrepaired recalls. Owner Earl Stewart, 76, instituted the policy in June.

He currently has about 100 vehicles parked on a storage lot. Most of them need replacement Takata airbags. The dealership does take trade-ins that have unrepaired recalls. If he didn’t do that, he’d lose too much business.

Related: My Car's Been Recalled: Now What?

“It’s getting pretty expensive. I can’t continue to inventory these cars indefinitely,” Stewart said. “At some point, financially it’ll be too much for me to deal with, so I don’t know what I’m going to do then.”

Why not sell these cars and simply have the buyers sign a waiver form, as so many other dealers are doing?

“It’s too dangerous to rely on your salesperson to make a complete disclosure. And even then, I wouldn’t drive one of these cars,” Stewart told NBC News. “Even if a person bought the car and signed the waiver form, I just think it’s an immoral thing to do. If I know the car can kill them and the customer says that they understand that, but they want to buy the car anyway — I would still feel bad if something happened to that person. It’s just a moral decision, not a legal one.”

How to Protect Yourself When You Buy a Used Vehicle

Before you buy any used vehicle, go to the government website to see if that particular car or truck is subject to a recall and if that recall work has been done.

Many people use CarFax to check on a vehicle. Some dealers even provide this report for free. Remember: CarFax does not pick up everything that happens to that vehicle. For example, some accidents are never reported.

It’s also a good idea to ask the salesperson about any recalls. If you’re told a recall has been repaired, ask for proof.

The smart move is to have any used vehicle you’re interested in buying inspected by a qualified, independent mechanic before you sign the contract to buy it.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.